Scotland is hailing the success of the first ever project procured through the PFI alternative Non-Profit Distributing (NPD) model, which reached financial close in just 17 months, one month less than the 18-month deadline targeted by PF2.
The £50m Inverness College campus is the first project to be co-financed by public infrastructure corporation the Scottish Futures Trust (SFT). A consortium comprising developer Miller Group and investor Equitix was appointed as preferred bidder earlier this year and financial close has now been reached, with construction expected to start during the Summer.
“Completing the process in just 17 months is unprecedented and has saved significant costs, providing more value for money for the tax payer than the PFI/PPP model,” said Victoria Miller, director at law firm Pinsent Masons and lead on the project.
The NPD model was developed by the SFT as an alternative to PFI in an effort to get taxpayers a better deal by capping the returns consortia can earn on contracts at an agreed rate. Contractors invest solely in the debt of a project, and don’t put in any equity or receive returns on capital investment. NPD is one of several alternative finance models for key infrastructure projects being trialled in Scotland, including Tax Increment Financing. The education sector in Scotland has been the first to be financed through NPD.
“NPD is a much more efficient system that utilises a standard form of documentation to avoid protracted legal negotiations, it enables projects to move much faster into the construction phase,” added Miller. “Documentation has been drawn up by SFT to clearly define responsibility for project risks, they looked to transfer some risks back to the public sector rather than look to private sector to price for them. Concepts not in PPP documents such as persistent breach of contract are also included in an effort to benefit the private sector.”
Miller claims several Scottish banks are interested in the model and that once more projects come through the pipeline and risks are better understood more funders will want to take part.
The 13.3-acre Inverness College campus development will provide a state-of-the-art modern learning environment for over 8,500 students. Miller Construction will provide integrated design and build services and on-going facilities management for 25 years.
